So you’ve tied the wedding knot and now you find yourselves wondering where you begin in managing your finances as a married couple. Hopefully, any debts that were brought into the marriage were known before the wedding day leaving no surprises. I like to refer to the idiom where you “put it all out on the table” so to speak. Keep no secrets. Managing personal finances within a household can become stressful on a marriage. Lessen the opportunity for conflicts by disclosing everything from the start and finding ways to manage your combined finances. Don’t let the stress of finances take away from your wedding bliss.
Now that you know all your debts and assets, the next step is organizing and managing them as a couple. Consider any accounts that should reflect you are now married and may even need a change of last name. Look at the possibility of combining debt such as credit card balances to get the lowest rate of finance charges. This is the ideal time to discuss how you are going to share household expenses and any debt already incurred before the wedding. While most couples are merging two incomes together, each income may be very different. As a couple, you may decide that a portion of each income go into a joint account which will be used to fund all expenses. I have heard it often where married couples refer to the bills as “his” or “hers” and prefer individual accounts to take care of their share of the expenses. Either way, find a way to be organized so that no bills are overlooked which will avoid the late fees or finances charges.
Planning for your financial future together also means deciding how much you as a couple will save and spend together. This can be the sticky part as a couple. Do you get that feeling that somebody isn’t going to be happy with the idea of changing their spending habits? Here comes that dreaded word by many – Budget. It’s not as awful as one may think. I tend to refer to it as “following your money”. A simple budget starts by following where your money goes each month. Include monthly bills such as rent or mortgage payments, utility bills, cell phone bill. Document what you spend for groceries, gas, entertainment, etc. Include necessities such as cosmetics or haircuts. After just a few months, you will have a visual of where your money is going.
Discuss your short and long-term goals as a married couple and write them down. These may include paying off a car loan, buying a house, or even a retirement age. Give each goal a desired time frame that you would like to reach it. Write the goals down and have them posted where you both can see them. If you both are excited about taking a trip to Europe in a year but need to save for, having the goal in front of you will be that friendly reminder that you don’t need that new set of golf clubs or that new designer purse.
Consider all your options for investing in your financial future together. Are you taking advantage of your employer-sponsored 401k? An alternative to a 401k would be to open a traditional IRA or Roth IRA and schedule your contributions to those accounts. If you both have employer programs at work the more you can do the better. Ten percent of your income to savings is the extreme low end, the closer to 20% the better.
Now that you are married, not only do you have someone who really cares for you, they also now depend on you. The rule of thumb is get enough life insurance to cover five times your annual salary plus whatever is needed to pay off all debts. Some people get insurance through their employer and think that is good enough, but in most cases it never is.
Your first thought is, “we don’t have anything, why do I need a will?” That’s a good point but a will is the only way people will know what you truly wanted. If you have a will in place, you can put it away and in a couple years when you actually do have stuff, it will mean something.
Having a will though is just the start. You also need to put power-of-attorney’s in place for both finance and healthcare. It is probably best to have your new spouse as the primary, but you also need a backup. Make sure you ask the person before naming them. A power of attorney allows a designated person to act on your behalf. If you were to become incapacitated and can’t make decisions for yourself, this is extremely important.
This should have been first, but maybe if you are reading it last you will remember to do it! The emergency fund is what ties all of this together. Remember in idea #1 that “putting it all on the table” was to avoid stress. Well an emergency fund does that too. Having an emergency fund in place allows you and your spouse to weather the “money storms” that happen. When your air conditioning breaks in mid-July, spending the $500 to get it fixed because you had the emergency fund in place is much better then glaring at each other from across the room as you both sweat.
Also, the emergency fund is good in case you lose a job. With an emergency fund to help get you through while you find new employment, it relieve some of the stress of an already stressful situation.
Though the newlywed phase may go away, your marriage to each other will always be. Make the years ahead the best by taking the financial steps I have given you. Together you will whether the storms and celebrate the milestones!